If you are struggling with an unmanageable level of debt that you can’t afford to repay within a reasonable period of time, an IVA (Individual Voluntary Arrangement) may be right for you.
Providing you can commit to making regular reduced payments for (usually) five years, you may be eligible for an IVA.
But what is an IVA?
An IVA is a legally binding financial agreement between you and your unsecured lenders. As mentioned, if you can commit to making reduced monthly payments throughout the duration of the agreement, you may be eligible for one.
If enough of your unsecured creditors agree to the terms of the IVA, they will cease any legal proceedings against you (if there are any underway, of course) – and agree to write off any remaining unsecured debt left unpaid once the IVA reaches a successful close.
It is important to note that if you do enter an IVA, this will be shown on your credit report, and will stay there for six years. This will have an impact on your ability to obtain further credit for this time.
Basically, if you enter an IVA, you will make your monthly payments to your IP (Insolvency Practitioner) for the duration of the agreement. Your IP will then share funds amongst your creditors according to how much you owe each of them, as agreed.
If you are a homeowner, you may be required to free up some of the equity locked in your home during the final year of the agreement. This money will be used to repay more of your debt before the IVA draws to a close.